African focused integrated digital payments and commerce company, Interswitch is paving the way for proper valuation, and investment for other payment services providers and Fintech companies, after it resumed plans to list on the Nigerian and London Stock Exchange, a process that was halted two years ago due to Nigeria’s economic instability.
The company is reported to be making major steps towards IPO listing after it hired JP Morgan Chase & Co., Citigroup Inc., and Standard Bank Group Limited as financial advisers.
Although Interswitch had in 2015, announced a dual listing by 2017, the plan was canceled as a result of Naira devaluation foreign exchange scarcity at the time. However, Mitchell Alegbe, CEO Interswitch had in 2017, assured stakeholders that plan to list the company shares were still on the table.[admnager ad_id="desktop_1" placement="desktop" lazy="false"]
Market analysts say that if the company in fact goes ahead to list on either or both stock exchange markets, Interswitch will be creating an avenue for a new wave of deep pocket Nigerians to invest in publicly listed financial technology companies with better valuation. It may also prompt smaller online payment processing companies with great impact like Flutterwave, Paystack, VoguePay, E-Tranzact, and others to move to the capital market. Others say this may be the best exit strategy for initial investors.
“This will open up local investment options in ICT, because listing will help the Nigerian and global community better understand the value of technology startups,” Segun Arogundade, technology industry analyst said.
Private equity group, Helios Investment Partners owns about 70 percent of Interswitch. Other shareholders include South Africa’s Adlevo Capital Managers LLC and the International Finance Corp, a unit of the World Bank.
BusinessDay recalls that about four years ago, Helios Investment Partners, a major investor in Helios Towers, a telecoms infrastructure firm in Nigeria sold its stakes and operational assets including 1,211 towers to IHS Towers.
“The struggle to support capital expenditure (CAPEX), ride down debt and fund budget is becoming a priority, and companies playing in the telecommunications and Fintech industries which is a tough market, have no other choice but to seek to raise funds through the capital market,” Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON) told Businessday.
According to Teniola, Fintechs are not ignorant of the threats that are going to happen when Payment Service Banks (PSBs) become operational and so, they need to increase CAPEX to compete favorably in the market.
“Digital payment service providers like Interswitch need to be able to offer end-to-end solutions, consider other portfolios and not just be a payment gateway. Already telcos and e-commerce platforms have resorted to different capital markets both locally and internationally. Until there are other means of funding CAPEX, companies that want to compete, will at some point, need to go into the capital market,” Teniola said.
The payment company, headquartered in Lagos Nigeria is valued at $1.3 billion to $1.5 billion, according to Bloomberg report.
BusinessDay contacted the public relations team for Interswich who refused to comment on the new development.
“We don’t want to talk about anything related to the IPO,” the source said.
Interswitch is Nigeria’s foremost online payment processing company, and uses a ‘switching’ infrastructure to connect the different banks in Nigeria and provides technology for ATM cards.
The company has been involved in the signing of major deals, investment in new technologies and several business partnerships in Nigeria recently.
In May 2019, the company signed a N26 billion deal with a British transport ticketing company to create electronic cards to enhance transportation in Nigeria. In November 2018, Interswitch partnered with Microsoft to extend supply chain financing (SCF) service to Nigeria’s growing SME community using blockchain technology. It has also partnered with Smile Communications for financial inclusion services and others.
Jumoke Akiyode-Lawanson
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